We have been hearing a lot about interest rates over the past few months and with another recent cut, they are now at an all-time low. These rates have had a direct impact on the property market, with home buyers, investors and owners being encouraged to take advantage of the current conditions. In an attempt to rebuild the economy post-pandemic, these interest rate cuts are fuelling market activity and putting upwards pressure on housing prices.
As of October this year, Australian housing values had increased nationally for the fist time in almost six months, with Melbourne being the only capital city to record a drop in value. The October figures saw regional markets outperforming capital cities with Darwin boasting the largest increase in prices since the beginning of the pandemic. Whilst prices are still down overall since the crisis struck in March, it is becoming clear that the impact COVID was expected to have on the property market has not been as severe as initially anticipated.
In addition to the interest rate cuts, first-time property purchasers are being incentivised through government stimulus and schemes, all of which differ slightly depending on what state you reside in. First homeowner grants, lowered deposits and relaxed lending criteria are among the contributing factors that have led to an increase in Australians who are entering what was previously considered to be an ‘unattainable’ property market.
Those who already own property will look to benefit from decreased mortgage rates and an opportunity to increase their investment portfolios. Some of the big banks including CBA have announced that they will not foreclose on homeowners who had met their loan commitments pre-pandemic and have been financially impacted by COVID-19. The surplus of buyers and shortage of stock should see prices hold firm coming up to the Christmas period and leading into the new year.
On Melbourne Cup Day, the Reserve Bank slashed its benchmark interest rate to a record low 0.1% and flagged that it would stay there for the next three years. This message will be vital for the economic recovery from COVID-19, giving Australians confidence to borrow money and purchase property once again. Whilst it will take some time to reach pre-pandemic conditions, it is evident that recovery is well underway, bringing renewed optimism and growth to the Australian property market.